Bloomberg News

Malawi’s Post-Election Chaos Risks Deepening Economic Crisis

May 29, 2014

Voters in Malawi

Hundreds of residents from the Ndirande township queue to vote in Blantyre, Malawi on May 21, 2014. Photographer: Gianluigi Guercia/AFP via Getty Images

A political impasse in Malawi following a disputed election threatens to deepen an economic crisis in a nation already reeling from a freeze in donor aid that funds 40 percent of the government’s budget.

More than a week after the vote took place, the Malawi Electoral Commission is yet to release results after allegations from political parties of rigging and conflicting court rulings on whether there should be a recount of the ballots. President Joyce Banda, 64, said irregularities were widespread and sought to have the election annulled and rerun in 90 days, a move that was blocked by the High Court.

“The country is in a very dire situation,” Yvonne Mhango, an economist at Renaissance Capital in Johannesburg, said in a phone interview yesterday. “Donors are waiting for some sort of political resolution. They want to know who the new government is going to be before they can sit down with them to talk about some sort of way forward.”

The International Monetary Fund and other donors suspended as much as $120 million in aid during the second half of last year following reports that almost a third of state funds were being pilfered. Banda fired her entire cabinet in October and vowed to combat graft, yet battled to convince the electorate her administration wasn’t complicit in the scandal, dubbed “Cashgate” by the local media.

With ballots from 30 percent of 4,445 voting stations counted, Democratic Progressive Party leader Peter Mutharika had won 42 percent support, while Banda, who heads the People’s Party had 23 percent backing, the MEC said on May 23.

Tobacco Producer

Malawi is Africa’s top exporter of burley tobacco, a low-grade variety of the crop. Limbe Leaf Tobacco Co., a unit of U.S.-based Universal Corp. (UVV:US), Alliance One International Inc. (AOI:US) and Japan Tobacco Inc. (2914) are among buyers of the nation’s crop.

Banda became Africa’s second female president when she succeeded Bingu wa Mutharika, Peter’s brother, who died in office in April 2012. She devalued the kwacha and raised fuel prices a month after taking office, unlocking aid from donors such as the U.K. and the IMF and sparking nationwide protests over rising prices.

In April, the IMF estimated economic growth would accelerate to 6.1 percent this year from 5 percent in 2013.

“The government is the biggest driver of economic activity” in Malawi, Mhango said. If the state comes to a standstill “then basically the whole economy stalls. I think you are going to see a slowdown, probably around 2 to 3 percent growth at best, if there is some sort of resolution in the next month.”

Stable Kwacha

The kwacha has gained 8.4 percent against the dollar this year as the central bank intervened to help stabilize the currency following its 22 percent slump last year. It fell 0.4 percent to 396.74 per dollar as of 4:45 a.m. in Blantyre, the commercial capital.

The vote count has been completed and results are due to be released on May 30, Maxon Mbendera, head of the election commission, told reporters yesterday in Blantyre.

On May 26, Mutharika’s DPP won an order in the High Court in Blantyre for a recount to be halted and the remainder of the results to be released. The next day, Lazarus Chakwera’s Malawi Congress Party obtained a ruling from the High Court in Lilongwe, the capital, that said the recount should proceed.

Blantyre Court

Another hearing in the Blantyre High Court on whether the results should released stalled today, after Judge Healey Potani had to recuse himself because his brother is the deputy chief electoral officer. The case will proceed once a new judge is appointed, Potani said.

Banda will probably lose power to Mutharika or Chakwera, and the extent to which she continues to command power and influence is questionable, Boniface Dulani, a politics lecturer at the University of Malawi, said by phone from the central town of Zomba.

“We are likely to see a lot more court action,” he said. “We probably won’t have resolution for maybe a month or so. The instability isn’t good for the country.”

To contact the reporters on this story: Mike Cohen in Cape Town at mcohen21@bloomberg.net; Frank Jomo in Blantyre at fjomo@bloomberg.net

To contact the editors responsible for this story: Nasreen Seria at nseria@bloomberg.net Karl Maier


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